Episode 23: Creating and maintaining culture

Creating culture is easy in the early, heady days of your business. When you're making all the decisions and sharing them directly with staff, your culture is often improvised and ad hoc. The challenge comes when you need to choose those elements of culture you want to pass on.

In this episode of Xero In, We speak to Angus Kennard, non executive director and third generation leader of Kennards Hire, about how to distill those values, and the mechanisms that pass them indirectly on to others.

Episode transcript

RS: Yeah, very well. I’m excited to be talking to Angus Kennard today, third generation of his very successful self-storage. Great family and a very strong sense of culture.

JVD: It's really interesting, too, because there’s all that thing about the third generation being the poisoned chalice. The first generation comes out of the desert, the second one builds the temple, and the third one returns to the sand.

RS: That's right.

JVD: Well, this is the thing, when you come from a family business tradition, a lot of it has to do with the personal relationship you and your family have with the people who work for you and your partners and your customers. Once you get to the sort of scale that Kennards is at, you can’t actually have that personal relationship, so how do you imbue your entire company with that sense of customer service or with that sense of honesty or with that sense of sort of being reliable? How do you actually communicate that?

RS: Yeah, it’ll be fascinating to find out. On top of that actually having a tradition of culture, you know, does it survive the test of time over multiple generations?

JVD: Absolutely. Let's hear from Angus.

JVD: We’re joined today by Angus Kennard, he’s a Non-Executive Director of Kennards Hire. Hey there, Angus. How are you?

AK: I’m very well.

JVD: Thank you so much for joining us on Xero In.

One of the things that often happens to family businesses as they grow is that it becomes quite difficult to continue to communicate that underlying culture. One thing is when you are constantly in contact with your staff, and with your customers, and with your suppliers, but as Kennards is getting larger, you don’t have direct contact with all of your customers or all of your suppliers anymore. How do you actually make sure that that culture continues to be conveyed through everything that Kennards does?

AK: We went through a period of growth where we were doubling every five years and we did that for 20 years. Here we are at the point where we’ve got 1,300 people working in our business, and how do you amass those people to deliver on the things that you think are really important? We always felt we had this strong culture but we weren’t able to enunciate it. People could say, it doesn’t feel right, it just doesn’t seem right in what we’re doing, but we couldn’t actually put words to it.

That was a challenge for us, is that we wanted to enunciate what our culture was and how we did that is that we got a number of experienced people, many have been around for a long period of time, and they were to actually uncover in words what our culture was. That stemmed from what our family vision was. Our family said this is the vision for the business, this is what our values are, you need to come up with what your values are for the business. The business, in essence, came up with what our brand promise was, which is to help make our customers’ jobs easier. That has actually stemmed back to how Kennards started with my grandfather who, one day in 1948, he was an equipment merchant and he used to sell things like concrete mixers and it was the day before premix concrete.

A customer said, “Look, I don’t really want to buy, can I borrow it?” My grandfather said, “I can’t loan it to you, but I’ll hire it to you.” That's how Kennards started. It was that customer-centric approach that actually was alive back then that it's actually still alive today. That is what our brand promise is, it's what our brand promise always has been.

JVD: What would be fabulous if you tell us a little bit about your, I guess, earliest recollections of working in the family business or being involved with the family company.

AK: When we were all young my dad used to teach work ethic to us, and how we used to do that is we used to package up accessory items for the business that used to sell with the equipment. With that there were things like Ramset explosive charges which you wouldn’t get too many eight-year olds dealing with these days, but we used to package up things like that, things like nails, measuring rope and cutting them, et cetera, et cetera.

My dad, his expectation was never that we had to come into the business, it was really about us following our dreams. Part of that was we had to go out and do something, you know, work for someone else first. He said, “Look, if you want to come into business, fine, but you’ve got to go and make mistakes on someone else’s time for at least five years.” Getting a job, having to perform in a job, sometimes having to hire people, sometimes having to fire people, they’re all things that were, I guess, we had to learn before coming to the business and making mistakes on his watch, so to speak.

RS: For your father, that generation, culture as a concept and a term wasn’t as relevant, but they represented and lived in a certain manner. What were some of the things that you took away growing up that have kind of flowed into the business today?

AK: My dad was always about being the best, not being the biggest. It wasn’t pursuing growth for growth’s sakes, it was about pursuing excellence and quality in excellence in everything we did. There’s a number of mantras that we have that have actually carried on to the business these days from those early days of my uncle and my dad actually living them and actually breathing them and actually carrying them through the business.

JVD: Angus, I understand that the organisation is very focused on culture and you have four elements of that culture that you’ve identified. Can you just go through what those elements are and how you went about identifying what was important to Kennards Hire?

AK: Yeah, so our four values are Fair Dinkum, Every Customer a Raving Fan, Taking Hire Higher, and One Family. Fair Dinkum is very much about how we operate. We’re very grounded, we wanted to be real. We sort of see that as an integral part of our policy. We have this reverse pyramid that we talk about with our people where it's our customers that actually sit on the top of the pyramid and it's really the family and the Board that actually sits at the bottom of that pyramid, and it's we’re really to them to lead the charge in that way. Every Customer a Raving Fan is about doing whatever it takes to satisfy our customers’ needs. Taking Hire Higher is about innovation, it's about continuous improvement. It's actually about growing the category of higher in itself.

One Family is looking after your mates, people coming safe home every day, and working towards a common cause. How we did that is firstly we actually had to understand what culture was. Culture, how we see it, it's the way we do things around here and why we do it. Then we needed to understand what we thought were our values, and we went through a process that took a couple of days for a number of our people to actually clearly enunciate what the words are that we’re actually trying to do. That's really how we came up with it. The process is actually just as important as the words, because you really want people to buy into this.

JVD: Were there any elements of your company culture that you can really attribute to your grandfather and to your great uncle, or was it a culture that developed as the company was growing?

AK: I think Every Customer a Raving Fan is really attributed to my grandfather who his focus was on the customer at that time, and that's how our business started. For him saying, “Yes, you can’t borrow it but I’ll let you hire it,” that customer initiative was actually very customer-centric. That value started in 1948 and it actually still is central to what we do today. My grandfather grew up in the Depression and so in that time there wasn’t a huge amount of money. He used to be a jackaroo, and so being someone who is very down to earth is actually something we feel is actually resonated in the company ever since, and that's part of our Fair Dinkum value.

RS: It's interesting that when you’re defining your culture, you’re not just using one word, it's phrases that have verbs in them, so it's very much a doing and how you do it. Do you link that back through to your recruitment, and when you’re hiring people, what type of attitudes do you look for that reflect those values and those cultures?

AK: Yeah, that's a good question. How we did that is that we selected our 12 best managers and we actually psychometrically profiled them. From that profile we were actually able to build what we saw was an ideal person that would fit our culture. We use an online program called Expr3ss that actually when people apply for a job here they apply through Expr3ss. There’s two dials, one dial is on Fit and on dial is on Skill. The Skill is normally the part that is actually easy to train, the Fit is the part that actually is the most difficult to train. We actually try and recruit more on Fit than we do on Skill because we want people to be around here for a long period of time, and we are willing to up-skill our people to do whatever job that they feel they can.

RS: That’s Expr3ss with a “3” in it, isn’t it?

AK: It is, yes.

RS: When you’re uploading into Expr3ss, what is the ideal candidate that reflects the culture of Kennards?

AK: The ideal candidate is someone that is customer-centric, someone that is, we talk about being fair dinkum, that’s someone that real, someone that wants to be part of a team, someone that’s willing to work hard, someone that actually, they use the term “not a wanker”, but we don’t want people that aren’t going to fit in to, you know, they’ve got to be a good person. If they’ve got a family, that's good, too, because we feel that measured in with what we said that's really important. They’re sort of some of the elements that we look at that we see are very important in order for them to fit into Kennards.

RS: What about at the other end, when does culture trump performance? You have an employee that is performing very well but isn’t or no longer culturally aligned with your values. At what point do you make the call?

AK: Yeah, so we have one of our mantras is Culture Trumps Policy and we have a really strong culture and people are living by the culture. They actually get pulled up, like the actual culture is self-fulfilling is that people say, you’re not being fair dinkum or that's not one family. When you have a really strong culture, people that don’t fit in actually get pushed out. There’s a natural attrition where you actually get pushed out of the organisation. Getting to that point is really important. Before that point, I guess that's another issue. If someone doesn’t fit in, they generally know they don’t fit in and generally the culture does push them out.

RS: Do you think these values that you’ve encapsulated for your culture, do you think it’ll stand the test of time? You know, third generation family, foreseeably fourth, fifth generation, how much flex or how broad are the terms that you have to carry the test of time?

AK: I mean culture is really about behaviour and so it's really about making sure that people are behaving in a way that we feel represents the values. We sort of see that the culture and the behaviour are some things that we feel is our success and one of our actually grand promises, and so we see it necessary for that to stand the test of time.

JVD: Is there much of a difference between your work culture and family culture?

AK: I think that work culture is a lot more discipline and execution. I guess the soft and the hard. The family is a lot more about soft stuff whereas the business has sort of got more of a blend of the hard and the soft, because it's the soft things that are the things that actually are going to keep the family together.

When you’re dealing with family members, you can’t just go and sack family members, you’ve got to work with family. There’s plenty of family businesses that have actually gone belly up not because of the business, but because of the family.

The most important thing with family is actually the relationships. Building those relationships, and we do that through an annual retreat with our next generation because we know that if times are tough, we really want that next generation to have a really strong bond and be really close, and we feel that really it works really well by spending quality time together having fun.

RS: You haven’t fired a family person at Christmas time yet?

AK: Well –

RS: Thought about it.

AK: not as such but, see, you fire them and they just come back.

RS: I love that idea of having a family charter. Is it something that's organic?

AK: It is. It’s KFC. It's Kennard Family Charter, so it’s not the –

RS: Not the bird.

AK: it's not the deep-fried chicken type, but so we I think we’re up to version 10 or 11. We review it every year. There’s things that we add in or things that we take out. It's a fluid document that we look at and...

RS: Fantastic.

AK: ... it's important we do look at it and it's important that we do bring it to life.

RS: Can you give us an example of something that you’ve added or taken away from the family charter?

AK: It lays out things like working in the business, what are the rules around when a family member wants to work in the business, how does that work? You’ve got to work outside the business for five years. You can’t report to another family member. You’ve got to be managed and be at the level that actually reflects your capabilities. It's not a God-given right to be the CEO as a family member, it's sort of fitting in the flow of where you sit in the organisation. That's one example. There’s a lot about the history of where we’ve come to, why we’ve got to where we are, what are the philosophies, what are the values that we look at.

Just having very clear rules about being a family member, but also about being a family member in the business.

Things like governance is really important. We have a property company and we have Kennards Hire Company, we talk about what are the governance rules we want for those to live by so it's clear for the Boards of those business to follow their Board charters which are sort of based on I guess the family charter, if you like. We have things like we have what we call a CRAC team which stands for Chris, Rory, Angus, Cameron. That's the next generation that gets together and we meet as to where we see we want to talk about what's happening in the business but where we see the future of the business. There’s a number of those mechanisms that we have that allow us to make decisions in certain areas.

Like our family forum includes six of us plus four spouses, and we have meetings around our annual retreat. We might look at a topic that we think is important. Last year’s topic we talked about was mindfulness. Talking about being more mindful and how we manage that. We had one on health. We have different topics that we try and cover each year. I’m trying to think of something we took out, I can’t remember. I mean if we take out it's generally not that important.

JVD: What advice would you give to the next generation of Kennards who are coming into the business?

AK: Well, I think the next generation of people is actually really exciting because they’re so tech savvy, and being able to tap into that tech-savviness to be able to launch Kennards into the future, I think that's really exciting. From a family point of view, we’re trying to ready the next generation and equip them, not only with the skills themselves to be able to deal with being part of our family, but also being part of the business, and hopefully some of their passions, we’ve got 14 in the next generation, all we need is a couple of them to have some interest in the business that are good that we know that there’ll be a lot that want. That's okay, we really encourage our kids to pursue their dreams.

RS: I love that, because succession planning and culture is not something that's often discussed. Do you at home live and breathe the same values that you have in the actual shop?

AK: It's funny, it's hard to separate at times. Our family value is a little bit different to our work value. One example of that is around health and well-being. We really want to encourage health and well-being in our family. We do encourage that in the business, but if someone’s unhealthy we’re not going to not employ them. They can still be a valuable member of the team, it's just that that's not something we see as a critical part of the business but we see it's something that's important for the family.

JVD: Tell me, too, in 2016 what are some of the challenges that you’re really keeping an eye on as being things that you may need to respond to over the next 12 months?

AK: 2016 is actually quite a challenging year for us because you’ve got half the country that's way off the boil and you’ve got half the country that's actually fine. We have got WA and NT and far north Queensland that were really growing under the mining boom. Now they’ve actually really come back, so there’s macro conditions that are actually having the effect on those branches. Adelaide’s like that as well, but then you’ve got, on the contrary, you’ve got New South Wales, you’ve got South East Queensland, you’ve got Victoria, and New Zealand that are actually all actually running ahead. It's trying to balance those two dichotomies where one is going backwards and one is really moving ahead.

RS: Listen, Angus, thank you so much for your time and for sharing these valuable insights. We appreciate it.

JVD: Thanks so much for joining us.

AK: Thank you.

JVD: Well, I’m heading home to review my family governance. I don’t know about you.

RS: Well, it's quite a dynasty, 14 people in the next generation all moving into this culture. You kind of do need, I guess, a guiding statement or guiding document to make sure everyone’s aligned.

JVD: Yeah, and that's always been the challenge with family businesses, is to be really clear about who’s responsible for what and who is, I guess, who owns what part of the business in terms of deliverables as well. It's really important.

RS: Yeah, it is 110%. A few things that I loved about this conversation with Angus was culture at the top, it's got to trickle down to everyone else, whereas he had the inverted pyramid, so the culture’s at the bottom and actually percolates up, back up to the customer.

JVD: I guess that when everybody in your company understands the cultural element then the decision process doesn’t become so complex. You don’t need to weigh things down with processes because decisions can be made based on cultural decisions.

RS: My fear always with culture is that once you put a fence around a feeling, you’re then by definition excluding something else. You’re not encapsulating everything that they once stood for, but on the flip side, it definitely makes what you’ve encapsulated a lot stronger.

JVD: Well, I guess the previous generation set up the last 20 years of success. We’ve only got time to see what the next generation is going to have.